You might already know the basics—but do you fully understand what your Profit & Loss Statement and Balance Sheet are really telling you?
Even for experienced business owners, these reports can raise questions. That’s why we’re here—not just to explain the difference, but to help you interpret what they mean for your business’s performance and financial health.
Even if you’re familiar with business accounting, revisiting the fundamentals of your Profit & Loss Statement and Balance Sheet can offer valuable insights—especially when you’re trying to make sense of what the numbers are really telling you.
What is a profit & loss statement?
Your P&L (also called an income statement) outlines your business’s financial activity over a specific period.
It includes:
Revenue – Income from sales and other sources
Expenses – Costs such as direct expenses, overheads, and operating costs
Why it’s important:
- Highlights where your business is generating income
- Identifies areas of overspending
- Shows whether you’re operating profitably over time
- Supports informed financial decision-making
What is a balance sheet?
Your balance sheet provides a snapshot of your business’s financial position at a single point in time. It’s based on the equation:
Assets – Liabilities = Equity
It shows:
- Assets – What your business owns (e.g. cash, inventory, equipment)
- Liabilities – What your business owes (e.g. loans, bills)
- Equity – What’s left for the owners after liabilities are subtracted
Why it’s important:
- Offers a real-time view of your financial health
- Useful for lenders, investors, and potential buyers
- Helps assess the overall value and stability of your business
Feeling unsure about what your reports are really telling you?
Even if you’re familiar with terms like equity and liabilities, interpreting financial reports can still be tricky. That’s where we come in—not just to simplify things, but to help you make sense of the details, validate your understanding, and clarify what the numbers are really saying.
We act as a sounding board to clarify what you’re seeing, validate your understanding, and guide you through any complexities. Whether you’re reviewing your latest P&L or trying to decode your balance sheet, a second set of eyes can make all the difference.
Get in touch today and let’s turn your financial insights into confident decisions.
About Pathfinder Solutions
Pathfinder Solutions advisory team members have either owned or managed businesses, or are investors themselves, so we know first-hand the challenges you face in your world.
Sure we’re Accountants, but the best solutions in business come from focusing on more than just the numbers. Our real-world business experience delivers just that.
